Air Canada operating profit rises as costs fall

Reuters Staff

3 Min Read

(Reuters) - Air Canada ACb.TO reported a 56 percent rise in third-quarter operating profit from a year earlier, marking a turnaround from the second quarter when bookings slumped in the wake of wildcat strikes and the collapse of its maintenance contractor.

An Air Canada plane gets ready for take off at the International airport in Calgary, September 20, 2011. REUTERS/Todd Korol

Air Canada and WestJet Airlines Ltd WJA.TO, its main rival, have been able to hike fares this year without scaring away passengers as both have kept a tight lid on capacity increases, even during the busy flying months over the summer.

Air Canada said it planned to increase its system capacity by 1.5-3.0 percent for 2013. For the current year, it expects system capacity growth of 0.75-1.25 percent.

Operating income in the quarter increased to C$421 million from C$270 million a year earlier.

The airline reported net income of C$429 million, or C$1.54 per share, compared with a net loss of C$124 million, or 45 Canadian cents per share, a year earlier, mainly due to foreign exchange gains.

On an adjusted basis, it earned 82 Canadian cents per share. Operating revenue rose 3 percent to C$3.33 billion.

Operating expenses fell 2 percent.

Air Canada plans to launch a low-cost carrier as a way to cut its high costs and boost revenue and market share after years of stagnation.

Passenger revenue per available seat mile, an industry performance benchmark, rose 2.2 percent from the same quarter last year.

WestJet reported an 80 percent rise in third-quarter profit on Wednesday as it flew more passengers.

The company did not disclose any new details on the size its pension deficit or its talks with the government over an extension of pension deficit funding relief.

Air Canada, whose special funding regulations expire in January 2014, had a pension deficit of C$4.2 billion ($4.2 billion) as of January 1, largely because of low interest rates.

Analysts have said funding the plan under normal rules could threaten the existence of Canada’s largest airline.

Shares of Air Canada, which has a market value of about C$530 million, closed at C$1.89 on the Toronto Stock Exchange on Wednesday.

The stock has doubled in the past six months on the back of expectations for improved earnings, the sealing of new labor contracts with its unions, and the whittling down of its high cost structure.